Reference no: EM131458576

Question: Procter & Gamble (P&G), the global consumer products giant, earns about $79 billion a year from its portfolio of leading brands, including Pampers, Tide, Pantene, Bounty, Pringles, Charmin, Crest, Iams, Oral-B, Olay, Duracell, Gillette, Secret, Old Spice, Fusion, and many others. Operating in 80 countries around the world, the firm employees about 135,000 people. Currently P&G gets about $500 million a year from e-commerce sales, a fraction of its total annual revenues, and management is looking to increase that amount-perhaps as much as eight-fold to $4 billion or more. Given that fewer than one in three online buyers shop for consumer package goods, the company isn't expecting a lot of customers to go online just to buy toothpaste, but it's optimistic. Nielsen, the research firm, also expects this category of online purchases to grow as much as 20 to 25 percent in the next few years. "Some [product] categories see as much as 30 to 50 percent of their business in e-commerce," said P&G's digital business chief.

"Our forecasts don't suggest consumer products will ever work like that. But it's not out of the realm of possibility e-commerce will be more than 1 percent of our sales. Getting north of 10 percent would be an aggressive goal, but somewhere in between that would be, we think, within the realm of possibility." P&G already earns about that much of its sales from dollar stores and drugstores. P&G isn't just sitting back waiting for more online sales to happen. It's increased its spending on marketing for digital media as well as on search, video, and behaviorally targeted ads (digital ads that rely on past online behavior to identify Internet users' interests). "Whether it's an investment in a banner ad, in a searchmarketing ad, or in a shopping experience . . . we will look at all of those and their ability to drive revenue for our company," said the company's digital chief. And, while many of the firm's brands already have e-commerce sites of their own, such as Pampers. com (with 1.5 million unique visitors a month), the company is also opening a brand-new online store, called the eStore. For now, P&G views its eStore not so much as a potential source of increased revenue but as a kind of laboratory where it can research shoppers' buying behavior and habits.

It plans later to share the resulting information with retailers like Walmart and Amazon that already sell P&G products. "We are very excited about the eStore's potential to reach more consumers and create new online experience and innovations that build our brands online," said P&G's vice president for North America. To be owned and operated by an e-commerce service provider, the eStore will open as a pilot project with about 5,000 consumers and carry a selection of P&G branded products. Shipping fees on all orders are capped at a flat $5 rate. After the brief initial period the store will open to the public. "As the growth in consumer web commerce continues to evolve," said the CEO of the store's operating company, "we are seeing a strong trend toward the broadening of consumer purchase interests into more product categories. With each new product category comes the opportunity to develop and test marketing, selling, and retention concepts.

1. One of the things P&G already knows about online shoppers is that they expect brand Web sites like Pampers.com to offer the most information anywhere about a product line, including all its size, packaging, and product options. Do you think online outlets like P&G's eStore can convert more shoppers' needs for information like this into Internet sales? What other purposes can a pilot Web site like the eStore serve for retailers?

2. Do you think personalization, customization, or behavioral targeting can help Web sites like the eStore to succeed? What sort of personal information would you be willing to share online to improve a retailer's ability to meet your needs?